Gammon Infrastructure eyes at least 2 road projects in FY17

Gammon Infrastructure will bid for half a dozen projects this fiscal and hopes to win at least two as government backs hybrid annuity model (HAM) for developing road network, a senior company executive said.

The government has embarked on an ambitious target of adding 30 km of network everyday and adopted the HAM model to attract private developers, who have been shying away from taking up projects on BOT basis mainly because of the risks like delay in clearances and approvals involved in it. (Image Source: Website)

Gammon Infrastructure will bid for half a dozen projects this fiscal and hopes to win at least two as government backs hybrid annuity model (HAM) for developing road network, a senior company executive said.

The government has embarked on an ambitious target of adding 30 km of network everyday and adopted the HAM model to attract private developers, who have been shying away from taking up projects on BOT basis mainly because of the risks like delay in clearances and approvals involved in it.

“Due to the delays in clearances and subsequent cost escalations, developers were reluctant to take up projects on BOT basis. As a result, the government also started awarding contracts on EPC basis. However, the recent introduction of the HAM model has given boost to the private sector, and we are also exploring this opportunity,” company’s Managing Director KK Mohanty said here recently.

According to the government’s plan, over 10 projects are likely to be out for bids soon and the company will compete in at least half a dozen of them.

“We will evaluate the projects that would come up later this year and only then bid for it. But we hope we will be able to bag at least 2 projects out of those which we will bid for,” he said.

Mohanty, however, did not disclose the size of the projects he is looking at bid for.

Under the HAM model, of the total project cost, 40 per cent will be funded by the National Highways Authority of India (NHAI). The remaining 60 per cent will be arranged by the concessionaire.

Once the project is completed, the NHAI will collect toll and refund the private players in installments for 15-20 years. This implies that the toll collection will be done by NHAI.

Gammon currently has a portfolio of 13 active assets, including 9 active road assets (5 operational and 4 under execution), 2 ports (1 operational and 1 under execution) and 2 renewable assets (both under execution).

The company is also engaged in areas of project development such as operation and maintenance services, EPC and project advisory services. It has presence in 8 states.

When asked how the company was servicing debt, Mohanty said, currently the debt is around Rs 3,000 crore.

“We have reduced the debt by Rs 2,000 crore by selling off six projects. Out of this, four projects are already operational, and remaining will be operational soon. As our projects get operational, it will start generating revenues. So, all the debts will start getting self-serviced from different operational projects,” he added.